Donald Trump Hammers Canada's Supply Management System For Dairy

OTTAWA — President Donald Trump singled Canada out by name Tuesday as he put dairy farmers north of the border on notice that they are in America's fair-trade sights.

Trump also signalled he wants to do more than simply tweak the North American Free Trade Agreement, saying he is looking for "very big changes" to the trilateral pact that includes Mexico, or else he will scrap it once and for all.

Trump levelled the threats — some of his strongest-ever anti-Canadian rhetoric — during an event at a Wisconsin factory where he unveiled his "Buy American-Hire American" executive order.

After what has been a relatively warm beginning in relations with Canada, which included what was seen by many as a positive trip to Washington by Prime Minister Justin Trudeau, Trump dropped the gloves on Canada's well-guarded dairy sector, one of the sacred cows of Canadian industry.

Other countries have taken runs at Canada's sacrosanct supply-management system in previous trade negotiations, and Trump appeared to be taking dead aim during his appearance Tuesday in the U.S. Midwest — in a state he took from the Democrats with his "America First" anti-trade message.

"When it comes to wasteful destructive job killing regulations, we are going to use a tool you know very well — it's called the sledgehammer," Trump said.

Standing up for dairy farmers in Wisconsin "demands fair trade with all of our trading partners," Trump said, "and that includes Canada."

In Canada, he continued, "some very unfair things have happened to our dairy farmers and others and we're going to start working on that."

"We're going to get together and we're going to call Canada, and we're going to say, 'What happened?' And they might give us an answer, but we're going to get the solution and not just the answer, because we know what the solution is."

Canada has decided to impose import taxes on ultra-filtered milk, a protein liquid concentrate used to make cheese. It had been duty-free but Canada changed course after milk producers there complained.

About 70 dairy producers in both Wisconsin and New York are affected. Trump promised to work with Wisconsin's congressional delegation to get a solution after the governors of Wisconsin and New York urged him to take action.

The work would start immediately, Trump said.

"What's happened to you is very, very unfair. It's another typical one-sided deal against the United States and it's not going to be happening for long," he said.

"We're going to get together and we're going to call Canada, and we're going to say, 'What happened?' And they might give us an answer, but we're going to get the solution and not just the answer, because we know what the solution is."

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Trump also criticized the U.S. trading regime, which calls for a waiting period, and consultations that can stretch to three months or beyond. He suggested it has stalled his attempt to renegotiate NAFTA.

"The whole thing is ridiculous. NAFTA has been very, very bad for our country. It's been very, very bad for our companies and our workers, and we're going to make some very big changes or we are going to get rid of NAFTA for once and for all."

Senior finance officials who briefed reporters on the meetings suggest the order would run counter to protections Canada has secured through the NAFTA.

Morneau and U.S. counterpart Treasury Secretary Steven Mnuchin will be in Washington on Thursday for meetings that will include central bank governors and officials from the International Monetary Fund and World Bank.

'Fair trade' with Canada

Trump said his order would minimize exemptions that allow foreign companies to bid on projects in the U.S., something Canada currently enjoys under NAFTA.

Last month, a free-market think tank suggested using more open trade in the dairy sector as a bargaining chip in upcoming trade negotiations with the U.S. in exchange for more stable trade in softwood lumber.

The Montreal Economic Institute recommended limiting protectionism in both industries to help consumers, spur economic productivity, and ultimately create more successful businesses in both countries.

Both are shielded from open trade in the existing North American Free Trade Agreement, employ more than 200,000 people in Canada, and claim a similar economic value of $14-15 billion to Canada's GDP.

The current system limits the amount of dairy and poultry Canada can import before a tariff kicks in. Dismantling it would mean lower prices at the supermarket, and a more internationally competitive industry, says the paper.